The Securities and Exchange Commission (SEC) filed charges against two former top executives of Wells Fargo & Company (NYSE: WFC) for allegedly misleading investors regarding the success of its core business.

The defendants in the SEC complaints were Wells Fargo's former chairman and CEO John Stumpf and former community banking business head Carrie Tolstedt.

Allegations against Stumpf and Tolstedt

In its complaint, the Commission alleged that Tolstedt publicly described and endorsed Wells Fargo’s key performance metrics called “cross-sell metric” to gauge the bank’s success from mid-2014 to mid-2016. However, he concealed the fact that the metrics were inflated by unused, unauthorized, or unneeded accounts and services.

Additionally, the SEC alleged that Tolstedt signed misleading sub-certifications of the accuracy of the public disclosures of Wells Fargo. The Commission argued that she knew or she was reckless in not knowing that those disclosures contain materially false and misleading statements about the cross-sell metric.

The commission is seeking a court order compelling Tolstedt to disgorge ill-gotten or unjust gains.

In a separate complaint against Stumpf, the SEC alleged that the former Wells Fargo chief executive signed and certified misleading statements regarding the bank’s cross-sell strategy and reported metric in 2015 and 2016.

Stumpf allegedly failed to ensure that the statements filed with the Commission were accurate after he notified that Wells Fargo was misleading the public about its performance metric.

In a statement, the SEC Division of Enforcement Director Stephanie Avakian said, “If executives speak about a key performance metric to promote their business, they must do so fully and accurately. The Commission will continue to hold responsible not only the senior executives who make false and misleading statements but also those who certify to the accuracy of misleading statements despite warnings to the contrary.”

Stumpf agreed to pay $2.5 million to settle the SEC complaint

According to the SEC, Stumpf decided to resolve the charges against him. He agreed to the Commission’s order requiring him to pay civil penalties of $2.5 million. He also agreed to stop committing or causing any future violation of the Securities Act.

Stumpf settled the case without admitting or denying the allegations of the SEC.

In January, Stumpf settled a complaint by the Comptroller of the Currency (OCC) regarding his role in the fake account scandal. He agreed to the agency's order prohibiting him from working again in the banking industry and requiring him to pay a penalty of $17.5 million.

In February, Wells Fargo agreed to pay $500 million for misleading investors regarding its cross-sell strategy. The payment was part of a combined $3 billion settlement by the bank with the SEC and the Department of Justice (DOJ).

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